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130% NET EXPANSION RATE Sales grew by 44% YoY
It got 630 customers with ACV over $ 100K 
This company provides the SEARCH ENGINE
company needs 
Here is an EASY thread on a HARD TO UNDERSTAND business
$ESTC Elasticsearch is an open source analytics and full-text search engine
It was released in 2010 & authored by Shay Banon
(Current CEO)
Elastic NV was incorporated in 2012 to provide commercial services
and products around the software It went public in 2018 
It was released in 2010 & authored by Shay Banon
(Current CEO)Elastic NV was incorporated in 2012 to provide commercial services
and products around the software It went public in 2018
But what is a SEARCH ENGINE
Let’s say you are building your #ecommerce website You add products to it, host it and bring it live
Users will start going through your products 
Of course, some users will want to look for something specific
Let’s say you are building your #ecommerce website
You add products to it, host it and bring it live Users will start going through your products Of course, some users will want to look for something specific
What can they do? Well, they can use filters to eliminate unwanted items
Or they can go even further 
Directly type what they want in a search bar on YOUR website
Doesn’t sound TOO difficult right 
Indeed, this can be seen as the internal “Google” of websites
Do companies develop this feature from the ground up? Or do they rely on a third party? 
Indeed, this can be seen as the internal “Google” of websites Do companies develop this feature from the ground up? Or do they rely on a third party?
If you want to add messaging to your app 
There is little chance your start developing the whole infrastructure on your own Just use $TWLO 
it will save your developers lots of time and be a more robust solution to what you could implement on your own in most cases
You want to add a robust, efficient and quick search engine to your website? Just use $ESTC and customise it to your needs
But… 
A search engine is something basic right 
You just type in some keywords and get back the ones that match
Well, there is more to a search engine than keyword-matching
A search engine is something basic right You just type in some keywords and get back the ones that match Well, there is more to a search engine than keyword-matching
$ESTC provides one of the best search engines available, when you type and search, it does the following
Auto-completion, correcting typos, fuzzy matching, synonyms matching 
Auto-completion, correcting typos, fuzzy matching, synonyms matching
Normalising tokens 
(e.g. remove punctuation from words) and reduce words to their root form (e.g. “foxes” become “fox”) Control for relevance, similarity and popularity 
in order to provide the best match for the user’s query
Is it important to provide a solid search engine Look at HappyFresh’s story
HappyFresh is a leading grocery shopping and delivery platform in South East Asia 
Customers were not completing orders 
as the search results were taking too long to appear
Look at HappyFresh’s story HappyFresh is a leading grocery shopping and delivery platform in South East Asia Customers were not completing orders as the search results were taking too long to appear
HappyFresh switched to App Search on Elastic Cloud 
and enabled it to support 10 times the search volume 2 times faster 
Not convinced yet? Here are $ESTC customer stories
https://www.elastic.co/customers/
Is that all? $ESTC is a powerful search engine and that’s it?
On top of searching through full-text data
$ESTC enables you to search structured data such as numbers and aggregate data 
$ESTC can then be used as an analytics platform
On top of searching through full-text data
$ESTC enables you to search structured data such as numbers and aggregate data $ESTC can then be used as an analytics platform
You can then write queries in order to aggregate the data you retrieved 
And then even visualise the data in the form of graphs
And it doesn’t stop here 
$ESTC is a good at analysing full-text data What could it be used for as well?
Application Performance Management (APM) by aggregating the logs (information on warnings, errors, events recorded by an application) 
from different applications
$ESTC is a good at analysing full-text data What could it be used for as well? Application Performance Management (APM) by aggregating the logs (information on warnings, errors, events recorded by an application) from different applications
These logs can then be analysed and translated into useful insights for companies
Security is another area where $ESTC shines by Analysing authentication logs 
from different sources Reviewing vast volumes of DNS data in an efficient way Monitoring endpoint activity to find uncommon processes and anomalies
Ok By now what $ESTC does should be clear
Given their lead in full-text analysis Their product has many use cases and helps companies deliver better search results, monitor events and improve security
Why can $ESTC win in this market? How is the market evolving?
By now what $ESTC does should be clear Given their lead in full-text analysis Their product has many use cases and helps companies deliver better search results, monitor events and improve security Why can $ESTC win in this market? How is the market evolving?
Let’s first take a look at how $ESTC is doing on http://db-engines.com
$ESTC search engine leads the pack with a popularity score of 153 vs. 89 for next-BEST (Apache Solr)
$ESTC search engine leads the pack with a popularity score of 153 vs. 89 for next-BEST (Apache Solr)
$ESTC has over 47k questions on http://Stackoverflow.com while Apache Solr 19.4k, Algolia 1.3k and $AMZN Cloudsearch 331Remember when we were saying that $ESTC is an internal Google
They have become the de facto standard - or “Google” - for enterprise search
How is the market evolving?
According to 360 ResearchReports
Enterprise Search market is set to grow from $ 3.2B in 2019 to $ 9B by 2026 (CAGR of 13%)
Proliferation of data and increased requirements from users drive the demand for enterprise search
According to 360 ResearchReports Enterprise Search market is set to grow from $ 3.2B in 2019 to $ 9B by 2026 (CAGR of 13%) Proliferation of data and increased requirements from users drive the demand for enterprise search
Certainly as customers increasingly rely on online means in order to access information (at banks, online shops)
According to Markets And Markets IT Operations Market is set to reach $ 45B by 2025 - up from $ 9B in 2020 (CAGR of 37%) Driven by wider adoption of cloud services 
and the need for companies to get a holistic / 360 degrees view of their IT operations
This encompasses the log management network and security management and anomaly detection
So $ESTC is a leader in Search and also offers IT Operations Monitoring and Security tools
What can be said about these? Here is what Forbes has to say
and also offers IT Operations Monitoring and Security tools What can be said about these? Here is what Forbes has to say
“Elastic’s APM product has matured enough that it’s only missing some minor features. The company sees the observability market trending toward a convergence of logging, metrics, uptime monitoring and APM...
...Elastic’s go-to-market message emphasizes that the company provides all four of those offerings across a unified pricing model and user interface”
And on Security $ESTC is securing its own part of the pie in Security Information and Event Management (SIEM)
“Elastic CEO Shay Banon thinks the endpoint and SIEM markets can converge over time. With Endgame added to the Elastic Stack,...
$ESTC is securing its own part of the pie in Security Information and Event Management (SIEM) “Elastic CEO Shay Banon thinks the endpoint and SIEM markets can converge over time. With Endgame added to the Elastic Stack,...
...users will gain access to a whole new level of security analytics to help provide better attack protection”
Read the full take here https://www.forbes.com/sites/robertdefrancesco/2019/09/29/elastics-core-search-technology-powers-multiple-growth-levers/#1dfae440784a
https://www.forbes.com/sites/robertdefrancesco/2019/09/29/elastics-core-search-technology-powers-multiple-growth-levers/#1dfae440784a
Summarized The CEO Shay Banon is betting on the fact that enterprises want a unified offering for Search IT Operations Monitoring and Security Information and Event Management
This is working and further supported by $ESTC impressive 130% Net Expansion Rate
The CEO Shay Banon is betting on the fact that enterprises want a unified offering for Search IT Operations Monitoring and Security Information and Event Management This is working and further supported by $ESTC impressive 130% Net Expansion Rate
If you are not convinced yet, here is an extract for the earnings call (08-26-20) Question: “Are you starting to see more evidence of as you put the convergence of buying centers into big suites or suite purchases?”
Shay Banon (CEO): “Yes, definitely the simplification of into three concrete solutions has helped especially when we go and talk to our customers […] and see all the features that are within […] the three of them we just released our major milestone in a preview release...
...of our single agent, and now, literally, endpoint protection is a click away for all of our observability users”
Financials check
Sales at $ 129m up from $ 89m a year earlier (44% growth)
Gross margins of 73% Up from 71% in previous quarters
Operating loss of $ 29m 
OpEx as % of Sales at 96% down from 100% a quarter earlier
Sales at $ 129m up from $ 89m a year earlier (44% growth) Gross margins of 73% Up from 71% in previous quarters Operating loss of $ 29m OpEx as % of Sales at 96% down from 100% a quarter earlier
Cash flow from operating activities at $ 22m
Current assets of $ 497m vs current liabilities of $ 317m
THE BOTTOM LINE $ESTC has become the leader in Search As it outranks competition in features and usage Shay Banon is rightly betting on the convergence of services at corporates and increasingly positions $ESTC as a Search, APM and Security solution
This translates into a Net Expansion Rate of 130% and a growth rate of 44% on $ 129m of sales By expanding the market it targets, $ESTC is able to escape its niche by applying its core capabilities to areas these are best used for
Market for IT Operations Monitoring and Security Information and Event Management is crowded with alternatives $ESTC excellence in Search and laser focussed expansion in areas it can win into create confidence - We have started a medium position
$LMND is on our watchlist To Be Reviewed SOON Please note that this is not a recommendation to buy - You are responsible for conducting your own research
Disclaimer - This is not investment advice in any form and investors are responsible for conducting their own research before investing.
Sources
✑ Investor presentation
✑ Company website
✑ DBEngines
✑ Forbes
Sources
✑ Investor presentation
✑ Company website
✑ DBEngines
✑ Forbes
✑ Nexthink
✑ StackShare
✑ MarketsAndMarkets
✑ 360 ResearchReports
✑ StackShare
✑ MarketsAndMarkets
✑ 360 ResearchReports
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